Achieving Economies of Scale in Higher Education

Creating economies of scale is critical for today’s colleges and universities, but there are four central conditions that will impact the success of institutions in achieving scale.

“Trump University! That’s what you get when you approach higher education from a business perspective, and we all know how that worked out.” This is the response one tends to hear when discussing business-minded management of higher education. However, most would agree that the application of business principles to higher education is, even if not desired by everyone, required in the modern institution. Purchasing, legal services, facilities management and other functional areas are adopting more and more businesslike approaches all the time.

But what about the academic side of the house? While there are plenty of business principles that could be applied to academics there is one principle that stands out above the others, and it begs the question: Should higher education institutions take advantage of the principle of economy of scale, both operationally and academically, to reduce costs and increase revenue?

It’s Never That Easy

Adopting business practices in the business functions of our institutions is relatively straightforward and easy, but when we cross the line into academics and academic support it’s a very different world. Accreditation demands, academic freedom, measures of quality and other issues confound even the best-laid plans. Still, some institutions have determined that the answer to our question is a resounding YES, it is in their best interest to investigate using the economy of scale to achieve their goals. And while some have found success in this endeavour, many more have failed.

This raises the next question:

What does it take to successfully scale?

Arizona State University, Southern New Hampshire University and Liberty University are three examples of institutions that have taken on this challenge with apparent success in recent years. How did they do it? Observations of, and experience with, both successes and failures suggests that if you’re considering such a move there are four necessary (but not sufficient) conditions that you’ll need to address:

1. Internal Alignment

First, and foremost, your institutional mission has to support, even require, expanding the reach of the institution beyond the traditional realm. Without this alignment, internal conflict will almost certainly sabotage the effort before it even launches.

2. Strong Leadership

You need strong leadership. And by this I mean a board, president, CFO, and provost who are committed to providing the leadership across the institution to make this happen. If any one of these flinch the project will certainly fail.

3. Strong Management

Strong management is critical to achieving economies of scale and it’s very different from leadership. Strong management is about people who know how to maintain academic integrity while implementing the business practices that are required to serve a student body that is probably unlike any served by the institution before.

4. Strategic Programming

Last but not least, the institution has to have the right program or programs that can be delivered at scale. At the risk of agreeing with the Senator from Florida, there may actually be an upper limit on the number of philosophy majors that we need in this world.

The Key To Success

While all are important, let’s focus on that last point in particular. Only a handful of institutions can be successful scaling their entire institution, and there is probably an upper limit on that number too. However, many of us can take a program or two, make some key investments (maybe hire a consultant) and then proceed to push the boundaries of our comfort level and experiment with—and learn from—applying the principle of economy of scale at our own institution.

The right program at the right time and place could provide needed resources for the institution, and that would be a very good thing for most of us!

“Even if you are on the right track, you’ll get run over if you just sit there.” Will Rogers said that many years ago, and it certainly holds true for institutions of higher education today. While becoming a global juggernaut will be reserved for a few, all of us need to continue to strategically evolve with the changing times.